Skip to main content

Savings: How much is needed?

I am not expert on retirement planning and have many years to go before readers of this blog would need to worry about "withdrawal" rate. However it's never too early to plan. Thanks to one of the friend, I came across few articles on "withdrawal" rate and how much one needs to save to maintain decent living standards.
Here are few assumptions to make:

  • "Safe or risk-free" rate of return is about 3% (equivalent of coupon on 30 year US treasury)
  • Protect "principal" as many years as possible
  • Mortgage is paid off
  • College expenses are over (and kids have settled down)
  • No major health care expenses
With these assumptions, one could assume that $100K per year income is sufficient to live in areas like Bay Area (which is one of the costliest but most cosmopolitan areas to live in USA).  Assuming about $25K in social security benefits, one would need to create $75K per year in additional income from retirement savings. That would mean one needs close to $2.5M in savings to maintain the "principal" and still maintain a decent life-style. Of course many of these assumptions would change if one moves to less costly area or assumptions change.


If you are interested further, read on following.
https://www.thebalance.com/how-much-can-you-withdraw-from-your-retirement-portfolio-453997
https://www.fool.com/retirement/2017/07/02/3-serious-problems-with-the-4-retirement-rule.aspx
http://money.cnn.com/2017/04/12/retirement/4-percent-rule/index.html
https://www.financialsamurai.com/the-ideal-withdrawal-rate-for-retirement-doesnt-touch-principal/
Well if these are the savings one need, it's good to know now! As I mentioned, this is just my interpretation of various articles. One should consult proper financial advisor to plan!

Coming to Trump drama, there is never a boring week. Only President Trump has skills to antagonize NBA, NFL players, Obamacare supporters (including some GOP senators) and North Korean dictator Kim in same week. Despite all this drama, I am surprised that stock markets are making new highs every week. So are there any good "picks" in these frothy markets? Given that oil market is holding up well, I am still staying with my hypothesis on "energizing" portfolio.

Comments

Post a Comment

Popular posts from this blog

2025 = Is it going to be 1997 or 2000?

Happy Holidays... After 5 months of hibernation with no real reason than writing block, I decided to use quiet morning of Christmas day to start writing again. Lot has happened in last 5 months - in particular release of Animal Spirits with Fed starting interest rate reduction cycle and historic victory of President Trump for 2nd term. As the year turns into 2025 and stock markets at all time high, one would wonder, what's next?  To answer this, one needs to look back at 1920s and 1990s to give us some context on where markets may be headed. 1920s saw invention of televisions, radio, wider adoption of cars, vacuums, penicillin and many other which we consider household items now. These inventions created roaring 20s with markets going up by 500% eventually leading to crash of 1929. However during mid-20s, markets keep going up due to excitement of these inventions and end of World War-1 and Spanish Flu Pandemic. 1990s also saw many inventions - the key being launch of Netscape in 1...
Post a Comment
Read more

Clicks to Tokens: Will 2026 Echo 1998's Boom or 2000's Bust?

My "blogging" was in hibernation last 8 months due to my self-imposed restraint given the environment as well as built-in inertia to get started despite so many interesting events and markets reaching all time highs after taking a big dump around "Liberation Day" in Apr...Around that time I had the blog ready that it would be repeat of Mar/Apr 2020 panic and recovery during onset of Covid Pandemic. The hunch happened to be correct and I was glad that I could keep and take some positions which I am still holding especially around AI theme. But that was then...as 2025 is about to wrap up in 10+ weeks, let's look at what's in store for rest of 2025 and 2026. And what's better time than to start writing again just before one of the most important week on the calendar with multiple key events coming up next week... Fed meeting to decide the course of interest rates - it's almost guaranteed that Fed will cut rates by 25 basis points (2nd time in 2025) and...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more